Mark Scheme (Results)

Summer 2014

Pearson Edexcel International GCSE

Economics (4EC0) Paper 01
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Summer 2014
Publications Code UG038573
All the material in this publication is copyright
© Pearson Education Ltd 2014

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General Marking Guidance

• All candidates must receive the same treatment.

Examiners must mark the first candidate in exactly the
same way as they mark the last.
• Mark schemes should be applied positively. Candidates
must be rewarded for what they have shown they can do
rather than penalised for omissions.
• Examiners should mark according to the mark scheme not
according to their perception of where the grade
boundaries may lie.
• There is no ceiling on achievement. All marks on the mark
scheme should be used appropriately.
• All the marks on the mark scheme are designed to be
awarded. Examiners should always award full marks if
deserved, i.e. if the answer matches the mark scheme.
Examiners should also be prepared to award zero marks if
the candidate’s response is not worthy of credit according
to the mark scheme.
• Where some judgement is required, mark schemes will
provide the principles by which marks will be awarded and
exemplification may be limited.
• When examiners are in doubt regarding the application of
the mark scheme to a candidate’s response, the team
leader must be consulted.
• Crossed out work should be marked UNLESS the candidate
has replaced it with an alternative response.

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Question Answer Mark
Number
1(a)(i) Substitutes

(1)

Question Answer Mark

Number
1(a)(ii) A Price

(1)

Question Answer Mark

Number
1(a)(ii) B Supply

(1)

Question Answer Mark

Number
1(a)(ii) C Demand

(1)

Question Answer Mark

Number
1(a)(ii) Quantity
D (1)

Question Answer Mark

Number
1(a)(iii) 1 mark shift of demand curve to the left
1 mark for new lower price indicated(eg P1) on
vertical axis
1 mark for new lower quantity indicated (eg Q1)
on the horizontal axis (3)

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Question Answer Mark
Number
1(b)(i) Definition:
Accept for 2 marks either
• average age of the population is increasing
or
• birth rate less than death rate
Vague definition, 1 mark e.g. more old people
than young people.

Do not allow: People getting older (2)

Question Answer Mark

Number
1(b)(ii) Norway
(1)

Question Answer Mark

Number
1(b)(iii) Each argument in support of the population
determining demand, up to 2 marks.
Development, up to 2 marks. e.g. an increase in
population will increase demand for all products (1
mark). A change in age distribution (1 mark) will
change the demand for particular products (1
mark).

Other factors identified 1 mark each, up to 2

marks. e.g. change in incomes, fashion/trends.
Development up to 2 marks. e.g. an increase in
incomes (1 mark) will lead to more disposable
income (1 mark).

• Maximum for 1 sided arguments = 3 marks

• Maximum for both sides = 4 marks

Need reasoned conclusion/judgement for 5-6

marks.
e.g population increase alone will not necessarily
increase demand for phones - it depends on the
ability to pay; fashion/trends might be the most
important factor because of influence of
advertising; availability of other technologies (6)
could make phones outdated eg tablets

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Question Answer Mark
Number
1(c)(i) B

3.2 million private sector workers earned less than

900 ringgit per month (1)

Question Answer Mark

Number
1(c)(ii) Private sector workers: workers who work in that
part of the economy owned by private
individuals/firms (1 mark). E.g.(1 mark) people
who work for HSBC (accept any feasible example)

Public sector workers: workers who work in that

part of the economy owned by the state (1
mark).E.g.(1 mark) policemen.
2 + 2 marks
(4)

Question Answer Mark

Number
1(c)(iii) Reason identified 1 mark, development 1 mark
eg
• low level of skill required (1) therefore
government has set minimum wage lower
(1);
• shortage of labour in the city (1) therefore
government have set a higher minimum
wage to attract labour from rural areas(1);
• surplus of labour in rural area relative to
demand (1) therefore government has set
minimum wage lower (1); (2)

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Question Answer Mark
Number
1(c)(iv) Each advantage of MWR, 1 mark each up to 2 e.g.
increase demand, increase standard of
living/reduces poverty, decrease voluntary
unemployment, reduces gender inequality
Development, up to 2 marks e.g. low paid workers
have more disposable income so will spend more
and stimulate economy. Women are often the
largest group to benefit

Each disadvantage of MWR, 1 mark each up to 2

e.g. increase costs, reduce international
competitiveness

Development, up to 2 marks e.g. firms will face

increase in costs which may lead to
unemployment. The increase in costs may be
passed on to consumers so inflation will occur.

• Maximum for 1 sided arguments = 3 marks

• Maximum for both sides = 4 marks

Credit use of diagram up to 3 marks if no written

explanations given but it must show the change in
employment.
Need reasoned conclusion/judgement for 5-6
marks. eg depends on:
• where minimum wage is set (ie above or
below the equilibrium wage);
• what happens to productivity
• reaction of firms eg how it effects demand
for labour (6)

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Question Answer Mark
Number
2(a)(i) Total costs = €1300
No. of kilos = 130
Average cost per kilo = €1300/130 = €10

1 mark for €10

1 mark for calculation or formula.
(2)

Question Answer Mark

Number
2(a)(ii) Total Revenue (TR)= 130 x €30 = €3900
Total cost (TC) = €1300
Profit (TP or P)= €3900 -€1300 = €2600

1 mark for €2600

1 mark for calculation or formula. (2)

Question Answer Mark

Number
2(a)(iii) B

Variable costs

(1)

Question Answer Mark

Number
2(a)(iv) 1 mark for definition: Variable costs change as
production changes

1 mark for reference to sugar: more needed as

more sweets produced.

NB: if no marks are awarded for 2aiii then

zero (2)

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Question Answer Mark
Number
2(a)(v) Fixed costs = rent + insurance = €500 + €50 =
€550
1 mark for €550
1 mark for calculation or formula.

Alternatively accept when candidate includes

heating and lighting but this must be explained in
(vi) as a fixed cost
1 mark for €650
1 mark for calculation or formula (2)

Question Answer Mark

Number
2(a)(vi) 1 mark =Variable costs are excluded
2 marks = Variable costs vary with output so when
output is zero no variable costs are incurred..

NB: if candidate only explains why only fixed cost

are included award (1) (2)

Question Answer Mark

Number
2(a)(vii) Each argument justifying why lack of (internal or
external ) finance will constrain growth (output
and/or market share)
• inability to finance expansion in scale of
output
• inability to grow market share or expand
into other markets

Each argument supporting other limitations to

growth 1 mark, up to 2. e.g. lack of demand (local
market/niche market), owner may not want to
expand, availability of other factors of production

• Maximum for 1 sided arguments = 3 marks

• Maximum for both sides = 4 marks

Need reasoned conclusion/judgement for 5-6

marks.
e.g. Even if finance is available and affordable
other factors may prevent or not justify growth. (6)

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Question Answer Mark
Number
2(b)(i) C

As output increases long run average costs fall (1)

Question Answer Mark

Number
2(b)(ii) Each reason identified, 1 mark each.
Development, 1 mark each
• they can buy in bulk so sell sweets more
cheaply than small firms.
• employ specialists who can determine best
place to place sweets in order to maximise
sales.
• use cost advantages of economies of scale
to lower prices and/or improve quality or
service levels
2+2 marks (4)

Question Answer Mark

Number
2(b)(iii) Each example of non-price competition identified,
1 mark e.g. advertising, loyalty cards, free gifts,
product differentiation, customer care, quality of
good,
Do not accept BOGOF or money off vouchers (2)

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Question Answer Mark
Number
2(b)(iv) Each argument supporting statement, 1 mark, up
to 2.
Development up to 2 marks
e.g. only a few large firms in the industry (1
mark) so consumer choice is limited. Sometimes
the oligopolies produce identical goods/services (1
mark) e.g. petrol so there is no substitute so little
choice (1 mark).
Also accept reference to cartels limiting choice.

Each argument against statement, 1 mark, up to

2.
Development up to 2 marks
e.g. most oligopolies may increase choice if they
focus on non-price competition eg product
differentiation (1) similar products with range of
features/brands e.g. additives to petrol to keep
engine clean, make it more economical (1 mark).

• Maximum for 1 sided arguments = 3 marks

• Maximum for both sides = 4 marks

Need reasoned conclusion/judgement for 5-6

marks.
Accept reference to type of oligopoly/type of
product. Credit good examples.
e.g. Choice will be limited as number of producers
is small but they can act in different ways
depending on the product. In petrol market
choice is limited but in soap powder market a few (6)
firms produce many differentiated products.

Question Answer Mark

Number
3(a)(i) Nigeria

(1)

Question Answer Mark

Number
3(a)(ii) Negative economic growth, reduction in real GDP
or output, economy has contracted/shrunk 1 mark
Reference to data (1) accept anything in range -
6.1 to -7.9) 1 mark (2)

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Question Answer Mark
Number
3(a)(iii) 1 mark for rate of interest should be lowered
1 mark for way in which it works e.g. makes loans
cheaper so firms may invest in new machinery
1 mark for development e.g. new machinery may
increase output leading to increased economic
growth

Also accept impact through consumption (ie saving

rates are lower therefore encouraged to spend
rather than save) or encourage to get a bank loan
to finance spending as now cheaper etc
(3)

Question Answer Mark

Number
3(a)(iv) 1 mark for government expenditure should be
increased
1 mark for way in which it works e.g. increases
demand
1 mark for development e.g. leads to more
employment.
Also accept development of specific types of
government expenditure. e.g. spending on
infrastructure may increase employment or attract
FDI, grants to firms (3)

Question Answer Mark

Number
3(a)(v) Supply measure identified, 1 mark. e.g.
privatisation, training, education, deregulation.
Explanation, 1 mark e.g. privatisation can increase
competition and efficiency leading to increase in
economic growth. (2)

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Question Answer Mark
Number
3(a)(vi) Disadvantage identified, 1 mark
Development 1 mark.
e.g. for privatisation in (v) disadvantage = private
monopoly may be formed (1 mark). This might
lead to less competition and less efficiency (1
mark).
e.g. training in (v) disadvantage = takes time and
money (1 mark), other measures might be more
effective in the short run (1 mark).

NB: if no marks are awarded for 3av then (2)

zero

Question Answer Mark

Number
3(a)(vii) Each advantage identified, 1 mark, up to 2. E.g.
higher incomes, more goods and services
available.
Development up to 2 marks e.g. more people will
be employed so the standard of living will rise due
to higher income.
Each disadvantage identified, 1 mark, up to 2. E.g.
pollution, risk of inflation, benefits of growth are
not equally distributed,

Development up to 2 marks e.g. external costs of

growth eg pollution may occur which will destroy
the environment. This may cause health problems
e.g. respiratory infections.

• Maximum for 1 sided arguments = 3 marks

• Maximum for both sides = 4 marks

Need reasoned conclusion/judgement for 5-6

marks.
Depends how growth has been achieved eg
increase in defence spending, depletion of natural
resources; reaction of governments to limit the
disadvantages eg to achieve more sustainable (6)
growth;

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Question Answer Mark
Number
3(b)(i) 1 mark = 2009
1 mark for definition:
deficit = government revenue < government
expenditure
1 mark for reference to data deficit = €36.05bn
OR
1 mark = 2009
2 marks for equation €124.65-€88.60 = €36.05bn
Also accept €124.65>€88.60 for 2 marks. (3)

Question Answer Mark

Number
3(b)(ii) Item identified, 1 mark e.g. tax, direct tax and
indirect tax, income tax, corporate tax, VAT, (1)
tariff, revenue from state owned industries

Question Answer Mark

Number
3(b)(iii) Item identified, 1 mark e.g. health, education,
infrastructure, welfare benefits, debt servicing, (1)
grants and subsidies

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Question Answer Mark
Number
3(b)(iv) Each reason why reducing budget deficit will lead
to unemployment, 1 mark, up to 2.
Development up to 2 marks.
e.g. if the government reduces expenditure (1
mark) on benefits (1 mark) then people will have
less money to spend (1 mark) and this will
decrease demand and lead to unemployment.
Each reason why it would not lead to
unemployment, 1 mark, up to 2.
Development up to 2 marks.
e.g. if expenditure is cut on goods and services
the government imports from abroad e.g. defence
goods then this will not lead to unemployment in
the domestic economy.
Also accept cuts in benefits may act as an
incentive for people to seek work and reduce
unemployment.

• Maximum for 1 sided arguments = 3 marks

• Maximum for both sides = 4 marks

Need reasoned conclusion/judgement for 5-6

marks.
e.g. Increase in unemployment will depend on
how deficit is decreased. If expenditure is cut
then it depends what is cut and by how much,
similarly if revenue is increased it depends who (6)
bears the burden.

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Question Answer Mark
Number
4(a)(i) 1 mark: % for developing countries increased
or
1 mark: % for developed countries decreased.

2 marks for relevant data from either developing

or developed or combination of data from both:
• Relevant data for developing countries:
28.5% (29%) to 41.2% (41%) (1 mark);
change of 12.7% (1 mark)
• Relevant data for developed countries:
71.5% (72%) to 58.8% (59%) (1 mark);
change of 12.7% (1 mark)

e.g. It decreased for developed countries (1) by

12.7%(1) and for developing countries it rose by
12.7%(1)

e.g. It decreased for developed countries (1) from

71.5% (72%) to 58.8% (59%) (1) which is 12.7%
(1)

e.g. It decreased for developed countries (1) from

72% to 59% (1) but rose in developing countries
by 12.7% (1)

e.g. It decreased for developing countries (1) from

71.5%
to 58.8% (1) but rose in developing countries
from 28.5% to 41.2% (1)

1 mark for developed countries still have a higher (4)

% than developing countries

Question Answer Mark

Number
4(a)(ii) Each benefit identified, 1 mark e.g. encourages
trade liberalisation/free trade, resolve trade
disputes, trade negotiations, monitors the trade
rules

Development, 1 mark.
e.g. no tariffs makes goods cheaper, economic
growth increases standard of living, specialisation
2+2

NB: benefits and development are interchangeable (4)

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Question Answer Mark
Number
4(a)(iii) 1 mark for explanation of non-tariff = a trade
barrier other than a tax on imports
Each example, 1 mark. e.g. quota, red tape, (3)
administrative barriers eg labelling requirements

Question Answer Mark

Number
4(a)(iv) Each effect of non tariff barriers on imports, 1
mark, up to 2. e.g can restrict supply or makes
importing more difficult (due to regulations)

Development up to 2 marks. e.g. can reduce

imports to zero, non-tariff barriers easier to
implement, restricting supply will raise price, range
of non-tariff barriers.

Each effect of tariff barriers on imports, 1 mark, up

to 2 e.g Tariffs raise price

Development up to 2 marks. e.g. give domestic

goods an advantage

• Maximum for 1 sided arguments = 3 marks

• Maximum for both sides = 4 marks

Need reasoned conclusion/judgement for 5-6

marks.

• Reference to PED e.g. if inelastic then total

import spending increases so tariffs
ineffective
• Depends on how consumer change spending
patterns, could switch to other imports
• The possible response of the WTO and other
countries (retaliation) could limit the success
of both
• Non-tariff barriers might be more effective
as their use is harder for WTO to prove. (6)

Question Answer Mark

Number
4(b)(i) Definition: the price at which one currency can be
exchange for another.

Vague definition, 1 mark (2)

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Question Answer Mark
Number
4(b)(ii) Euro
(1)

Question Answer Mark

Number
4(b)(iii) 1 mark for more money transfers out of the
country (hot money)
2 marks for increase in supply of currency (1
mark) leads to a new lower "price" / exchange
rate equilibrium (1 mark).

or

1 mark for less money transfers to country (hot

money)
2 marks for decrease demand for currency (1
mark) leads to new lower “price”/exchange rate
equilibrium (1 mark)

credit use of a diagram up to 3 marks, but must

show new lower equilibrium exchange rate. If no
explanation max of 2 marks for diagram. (3)

Question Answer Mark

Number
4(b)(iv) C
(Visible exports+ invisible exports) – (visible
imports + invisible imports) (1)

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Question Answer Mark
Number
4(b)(v) 1 mark for exports cheaper
1 mark for imports more expensive

For the additional 4 marks (up to 2+2)

• price elasticity of demand
• non-price factors (eg quality of exports,
inability to produce domestic alternatives)
• still import raw materials to produce
domestic produced goods
• even if exports rise we may have had to
import components to manufacture the final
product
• time lag issues may delay improvement in
current account
• depends on what is happening to other
currencies
• depends on relative inflation rates, relative
unit labour cost (6)

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